UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 13-60240-CR-DIMITROULEAS
UNITED STATES OF AMERICA,
Plaintiff,
v.
RICHARD ALTOMARE,
Defendant.
/
DEFENDANTS SENTENCING MEMORANDUM
Defendant, Richard Alexander Altomare, through undersigned counsel, respectfully submits
this memorandum concerning applicable sentencing guideline and variance factors and states:
1. The defendant appears before the court for sentencing on May 6, 2014. He has never
previously, over the course of a 65-year lifetime, been convicted of an offense, much less a felony
that will deprive him of his civil rights and likely place him in federal institutional custody. The
conviction, disgrace, and public humiliation of a once-proud businessman is, of course, both a
tragedy for him and a public demonstration of the consequences of law violation. This memorandum
offers reasons for considering the imposition of a sentence less severe than that suggested by the
government's sentencing memorandum, a sentence that will serve the interests addressed by 18
U.S.C. 3553 in relation to a man who, acting out of financial desperation, committed the offenses
documented in the undercover investigation in this case.
2. With regard to the guideline calculation issues reflected as unresolved in the
addendum to the presentence investigation report, several factors are relevant, including the unique
nature of the undercover operation in this case, in which the government informant redirected a
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hoped-for loan solicitation into a stock purchase and thereby offered the defendant an opportunity
that he accepted to encourage a stock transaction by offering the purchaser what the defendant
represented was a special positioning and advantage in the purchase, even though there was no
viable, active market for the stock and the principal purpose of the transaction was to induce the
investor to provide funds to the company to use to get on its feet and back into profitable status.
3. Four guideline issues remain unresolved: (1) how is the loss to be calculated where
no actual loss occurred and no realistic probability of an inflation of the value of the stock to be sold
could have been reasonably anticipated, in light of the absence of an ongoing market for the stock
and the absence of active trading in the stock, with or without regard to the issuance of a retreaded
press release concerning the direction of the company; (2) whether redrafting a former press release
to satisfy a stock purchaser that his purchase would precede release of the report constitutes
sophisticated means in this securities fraud case, particularly were there was no showing of actual
loss or of any effect arising from the press release (not a single stock purchase) and where there was
no mass designation of shares for sale that would have allowed for rapid inflation of the value of the
stock; (3) whether an order barring the defendant working with issuers of penny stock applies to his
efforts in this case to encourage corporate insiders who sell existing shares of their company at
market price and whether a company whose net-assert value was likely less than $2,000,000 qualifies
for inclusion in the penny stock issuance bar; and (4) whether the defendant's presentation of an
entrapment defense focusing on the fact that the defendant wanted a collateralized loan and that
the government initiated a change of the deal to focus on advantageous stock purchases represents
an obstruction of justice or merely a legally inadequate defense.
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4. Loss in the context of a securities transaction premised on false claims that a press
release is likely to cause an increase in stock value. The presentence report correctly reports that
there is no actual loss to any person in this case. PSI 20. The owners of SSBN, who testified at
trial, did not deem their company or its investors to have been harmed. The argument presented by
the government for an intended loss turns on the defendants use of hyperbolic pitches to the
confidential informant, made by the defendant on the theory that such grand profit expectations
would encourage the informant to invest. The governments theory is that because the defendant
used a sales pitch to the effect that the stock would increase by $1.00 or more if the company
released a optimistic press release following the purchase of a block of stock the terms of the sales
pitch should set the baseline for intended loss. But the premise of the governments position is not
consistent with the guideline analysis required for securities fraud cases or fraud loss guidelines in
general.
5. In fraud cases, in which there is no actual loss, the intended loss must be based on
non-speculative determinations of the likely impact of a fraudulent transaction. In other words, self-
evaluative statements in a press release or in an attempt to induce a purchase do not constitute the
measure of loss under the guidelines. See United States v. Wilson, 993 F.2d 214, 218 (11th Cir.
1993) (Courts must not speculate concerning the existence of a fact which would permit a more
severe sentence under the guidelines.). Factual findings must be supported by substantial and
reliable evidence. See, e.g., United States v. Gupta, 572 F.3d 878, 887 (11th Cir. 2009)888-90
(reversing loss calculation based on speculative analysis of potential loss).
6. In the defendants case, while it was wrong for him to falsely induce the confidential
informant to invest, through the use of exaggerated and unrealistic profit estimates (that were, of
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course, not relied on by the informant, who was acting in a case-making capacity rather than as a true
investor), the loss figure would more appropriately be the difference between the value of the stock
and the price for which it was sold to the informant. In traditional loss terms, when false or
exaggerated representations are made to induce a purchase, the difference between the actual value
and the amount to be paid is the intended loss. No different calculation can be applied in this case
without speculation as to potential effects of stock price by a single purchase of a block of shares.
7. The government has argued that impossible losses are included within the term
intended loss. But the relevance of impossibility or unlikelihood in the context of this case goes
to intended impact. Intended impact does not include the defendants wildest dreams, even
assuming he believed that the SSBN stock price could be affected in the absence of an active trading
market (or indeed any demonstrable trading market), particularly where the defendant was clearly
using exaggeration to induce an informants participation in an inherently speculative stock
transaction. The governments citation of United States v. Surles, 834 Fed.Appx. 834 (11th Cir.
2011) (defendant obtained account for the purpose of stealing funds; because Surles and his
co-conspirators secured and maintained complete access to the account, the district court did not
commit clear error in concluding they intended to deprive Cornell of the entire amount available to
them), and United States v. Menichino, 989 F.2d 438, 441 (11th Cir.1993) (creating false certified
appraisal of present value of real estate to induce loan required determination of whether loan
exceeded value of collateral; in a loan application case involving misrepresentation of assets, the
loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount
the lender could recover from the collateral), is not to the contrary, Use of unrealistic projections
of future value in order to induce a sale priced on the basis of the actual valuation at the time of the
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sale does not imply an intended loss, much less an intended loss of the entire value of the shares at
issue.
8. Lack of sophistication in a stock sale plan that offers merely transfer of shares prior
to a press release, where no plan of action for, nor realistic possibility of, capitalizing on such a press
release exists. The government relies on a recent unpublished (non-presedential) Eleventh Circuit
decision, United States v. Brennan, --- Fed.Appx. ----, 2014 WL 1394654 (11th Cir. Apr. 11, 2014),
in which the Court, applying deferential review of a district courts individualized determination as
to the facts of a stock fraud, found no clear error in the determination as to the sophistication of the
means used in that case. Brennan, while it has certain nominally comparative elements, presents a
fundamentally different set of actions and a great deal more sophistication that encouraging the an
optimistic press release following a stock purchase. In Brennan, unlike the present case, there was
substantial trading activity (five weeks of trading), including match trading, and [t]estimony
at trial showed Brennan did not simply follow orders, as he contends, but instead directed a
codefendant to issue kickback shares and forwarded a timed press release for publication. Moreover,
while Brennan evidently did not personally participate in match trading as part of the scheme, his
codefendant, who was responsible for the match trading portion of the scheme, testified he informed
Brennan of the practice. Again, the sale of stock and the issuance of an optimistic press release in
the market environment of this case a company that simply was not being traded actively does
not equate to the sophistication identified by the district court in Brennan. The governments reading
of Brennan does not take into account this critically important distinguishing factors. The hallmark
1
In its brief in the Brennan case, the government described the importance of the matched
1
trading element alone as follows: Third, the scheme used matched trades, a complicated and illegal
maneuver to manipulate the sell price of the stock of a publicly-traded company like OPTZ
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of sophistication is intricate planning that conceals the offense or effectuates a major deception. The
simplistic nature of the securities sale in this case simply does not meet the test.
9. Knowing violation of a judicial order. The government concedes that the penny
stock issuance bar arising from the defendants prior issuance of stock in his logistics company,
Universal Express, did not apply to stock of a company has tangible net assets of less than
$2,000,000. DE:76 at 11. And the government does not dispute that SSBN had tangible net assets
of less than $2,000,000. Instead, the government cites a regulation not addressed at trial, deeming
the term tangible net assets to refer to an audited statement of net tangible assets. Id. The
governments argument exceeds the limits of the order-violation enhancement which focuses on
whether the defendant knew he was violating a judicial order. See, e.g., United States v.
Mathauda,740 F.3d 565 (11th Cir. 2013) (reversing application of enhancement where evidence did
not clearly show defendants knowledge that conduct violated order). Nor does the government
address the fact that the stock sale in this case was not an issuance of new shares, but a transaction
in pre-existing shares. This is not a stock issuance case in the sense addressed by the prior SEC
order. The governments reliance on complex regulatory interpretations to characterize the sale of
stock in a small company as violative of the stock issuance order is unwarranted.
10. The defendant's presentation of an entrapment defense does not warrant an
obstruction of justice enhancement. The enhancement should not be employed where to do so
(DE249:145). Matched trades are essentially stock transactions that do not occur on the open market
between arms-length participants as they should, but rather involve a specific buyer purchasing stock
from a specific seller at an agreed-upon price (DE251:254; DE208:152). This was the arrangement
that Epstein proposed would occur for the OPTZ stock (with Brennans concurrence), involving the
fictitious broker on one side and Huggins or other complicit OPTZ shareholders on the other
(DE208:59-61). Govt Br. (11th Cir. No. 13-13077) at 9-10.
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would discourage the presentation of triable issues to the jury concerning basically undisputed facts.
Instead, the enhancement under U.S.S.G. 3C1.1 is applicable only where material facts are
provably misstated. A defendants opinions as to whether he would have engaged in the type of
transaction presented by the government in this case, but for his financial desperation and but for the
governments offer simply does not fall within the scope of the obstruction enhancement.
11. Apart from the guideline calculations, the Courts ultimate determination of the case
warrants consideration of a number of factors, including, of course, those going beyond the nature
and origination of the offense. Notable in Mr. Altomare's character is pride, and while the saying
is that pride goeth before a fall, pride is not without its good points. Mr. Altomare is proud of his
children and grandchildren, and ashamed of how his actions might affect them. He is proud of
recognition he previously received for charitable work and donations (including particularly Smile
Train, whose former director, Brian Mullaney, previously provided a letter of support for the
defendant), yet ashamed that his fall from business success has left him more in need of charity that
able to provide it.
12. Considering all relevant factors under the guidelines and in the context of this
prosecution, a sentence below the guideline range is appropriate.
Respectfully submitted,
s/ John E. Bergendahl
John E. Bergendahl, Esq.
Florida Bar No. 327761
Counsel for Defendant
Ingraham Building
25 S.E. 2nd Avenue, Suite 1100
Miami, Florida 33131
Tel. No. (305) 536-2168
Fax No. (305) 536-2170
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CERTIFICATE OF SERVICE
I certify that on this 5th day of May, 2014, a true and correct copy of the aforementioned
notice was served on all parties via electronic filing with the Clerk.
s/ John E. Bergendahl
John E. Bergendahl
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